New Delhi: A new report from Oxfam says that just four of the big pharmaceutical companies in the world may have “underpaid” an estimated $3.8 billion in tax per year across 16 countries.
What this means is that these 16 countries could have collected at least $3.8 billion more in taxes, between 2013 and 2015 from these four companies.
In India, these companies may have ‘underpaid’ taxes of at least Rs 530 crore ($74 million), between 2013 and 2015. Oxfam says that this money could have provided Japanese encephalitis vaccines and bed-nets to every child born in India between 2013 and 2015.
The figures are from Oxfam’s recently released report titled ‘Prescription for Poverty.’ The international confederation studied the available financial disclosures of four of the top pharmaceutical companies in the world, between 2013 and 2015. The companies studied are Pfizer, Merck, Johnson & Johnson and Abbott. These four companies had global revenues topping $1.8 trillion, from 2006 to 2015 (The Wire has sought clarification from Oxfam regarding the revenues of these companies between 2013 and 2015).
Essentially, the pharmaceutical companies have been shifting their profits out of countries where they do their business into tax havens. As a business practice, this is not always or necessarily illegal. But it may also not be in the spirit of the law. On top of this, the companies are also secretive about their finances, while also citing these same finances as a justification for their exorbitant prices of their drugs and other medical products.
The report analysed the figures across 16 countries, including India. Nine of the countries studied in the report are developed countries (Australia, Denmark, France, Germany, Italy, New Zealand, Spain, the UK, and the US) and six are developing (Thailand, India, Ecuador, Colombia, Pakistan, Peru and Chile).
The bulk of the possible tax shortfall comes from the developed world – out of the total $3.8 billion possible tax shortfall, $3.7 billion of it was from just these nine developed countries. And $2.3 billion of taxes were avoided in the US alone.
Impact on developing countries and India
According to UN estimates, corporate tax avoidance in general, costs poor countries around $100 billion a year.
Oxfam says that tax shortfall fuels further inequalities: “When drug companies dodge tax, it is the poorest in society who suffer the most as governments seek to balance their budgets by cutting essential services and raising other forms of tax.” The impacts on poor countries can be harsh because “poorer countries often have weaker public services, have a higher poverty rate, and rely more heavily on corporate taxes to fund public services.”
In India, Oxfam says the tax avoided could have provided Japanese encephalitis vaccines and bed-nets to every child born in India between 2013 and 2015. It could have also bought HPV vaccines for 8.1 million girls. Or it could have bough pneumonia vaccines for 8.3 million children.
Oxfam examined 17 subsidiaries of these drug companies in India. The annual revenue of these companies was $2,324,566,184.
The largest underpayment of taxes in India appears to be Johnson and Johnson. J&J is currently embroiled in a number of scandals over their “faulty” products and their refusal to pay compensation to victims in India while they have paid compensations in the US. J&J’s tax shortfall was estimated to be $41,450,191.
“Indian’s underinvestment is fuelled, in part, by extreme pressure placed on India’s public revenues by corporations evading and avoiding their taxes,” notes their report.
As a case study, the report analyses the Gorakhpur tragedy in Uttar Pradesh last August. Regarding this it notes, “Had the Indian government received the estimated $74 million the four US drug companies may have underpaid in taxes annually, it could have allocated these funds to fighting encephalitis and still have had enough money left to buy Japanese encephalitis vaccines and bed nets for every child born each year in the whole of India.”